Global equity markets continued their momentum in the second quarter as all major indices gained. Foreign markets again outpaced domestic markets as the MSCI EAFE posted a 6.12% gain vs. 2.57% for the S&P 500.
Fixed income markets also posted positive returns for the quarter. Long-term bond prices increased as the 10-year Treasury yield fell 0.08% over the quarter to close at 2.30%.The Bloomberg Barclays US Aggregate gained 1.59% for the quarter and lower quality issues performed even better, gaining 2.11% as measured by the BofA US High Yield Master II index.
Following its meeting in June, the Federal Open Market Committee (FOMC) increased the target range for the federal funds rate by 25bps to 1.00% –1.25%. This marks the second rate hike in 2017. The Committee observed that inflation has slowed in the short term but expects inflation to stabilize near 2.0% in the mid-term.
Economic data continued to be generally positive in the second quarter. Total nonfarm payroll employment increased by 222,000 in June, and revisions to the April and May figures added another 47,000 jobs. Employment growth has averaged 180,000 per month for the first six months of 2017 versus the average monthly gain of 187,000 in 2016. The unemployment rate rose to 4.4% up from 4.3% in the prior month.
Real GDP growth for the first quarter was revised upward to 1.4% from the initial estimate of +0.7%, and the core Personal Consumption Expenditure (PCE) inflation rate for May was 1.4%. Core Consumer Price Index (CPI) has not been above 3% for the last 25 years.
The Global Purchasing Managers’ Index (PMI) for manufacturing was 52.6 for June, and the US PMI was 52.0. Readings above 50 are an indication of economic expansion. The current economic expansion in the US is 96 months old — the third longest expansion since 1900.
Existing home sales rose 1.1% in May to a seasonally adjusted rate of 5.62 million units, and single-family new home sales increased by 2.9% to a seasonally adjusted rate of 610,000 units. As always, please call us to address your questions, and make sure to apprise your advisor of any changes to your financial situation.